Government to invite bids to lease out 5 National Highways to private operators

The road transport and highways ministry is expecting to rake in almost Rs 10,000 crore in the current fiscal year through leasing out 14 operational highways.Rajat Arora | ET Bureau | October 17, 2017, 08:44 IST

The ministry is also looking at other off-budgetary funding mechanism to fuel its ambitious highway construction programme.The government will invite bids to lease out five more public-funded national highways soon to private operators to raise funds to build more roads.

The road transport and highways ministry is expecting to rake in almost Rs 10,000 crore in the current fiscal year through leasing out 14 government-owned operational national highways under the toll-operate-transfer (TOT) model.

Bids have already been called for nine projects with a total length of almost 700 kms in Andhra Pradesh and Gujarat. The deadline to submit bids is January 9. Bids for a second batch of five, which the government now plans to lease out, are likely to be invited by the end of December, a top official in the ministry said.

Under the model, the highways would be leased out through competitive bidding for a period of 30 years to private equity firms, pension funds or other investors. The investors will collect the toll and maintain the project for the given period in lieu of an upfront payment to the government.

According to the ministry, investors will get handsome returns from projects as toll collection in India is rising at 7-8 per cent a year. From the first batch of nine projects, the government is expecting to raiseRs 6,000 crore.

The National Highways Authority of India (NHAI), the owner of all government-funded national highway projects, is estimating proceeds of Rs 4,000 crore from the second batch of five, the roads ministry official said. The government is planning to monetise a total of 75 operational national highways in a phase-wise manner in coming years.

“This year, we expect to get almost Rs 10,000 crore from two batches of highway projects. We’ll also get a sense how investors respond to our asset recycling programme. The response has been encouraging in the pre-bids meet,” the official said.

Several foreign investors including PSP Investments, CPP Investment Board, CDPQ and Abu Dhabi Investment Authority have evinced interest in bidding during the pre-bid conferences of the government.

The ministry is also looking at other off-budgetary funding mechanism to fuel its ambitious highway construction programme. It is planning to raise another Rs 7,000 crore through NHAI masala bonds on the London and Singapore stock exchanges, the official said.

Earlier this year, the government raised Rs 3,000 crore in masala bonds, which are rupee-denominated debt instruments sold in overseas markets. Moody's Investors Service recently assigned a Baa3 issuer rating with positive outlook to NHAI.

The ministry has a road construction target of 15,000 km for this fiscal year. It got almost Rs 65,000 crore as budgetary allocation and plans to raise anotherRs 45,000 crore from Life Insurance Corporation, Employee Provident Funds Organisation and other institutional investors as well as through masala bonds.

In fact, segment leaders like Maruti Suzuki, Tata Motors and Hero MotoCorp have reported de-growth of 34.3 per cent, 45 per cent and 20 per cent, respectively giving a clear indication of a prolonged slowdown in the sector.